Forex Currency Trading

Currency Exchange – Forex Mamma

Recent NFA Regulation Changes You Need to Know

Over recent months you may have noticed that the Natural Futures Association has been making changes to the regulations places on Forex brokers in the US. Some of the new regulations that you need to know about have to do with hedging, leverage and first-in first-out.

Hedging has been a popular strategy in the world of investment for years. However, new regulations ban Forex traders from opening both long and short positions, or “hedging”, on the same currency pair from one account. The NFA says the economic benefit of hedging is next to nothing as basically hedgers are simply cancelling out both of their investments.

At the end of last month the NFA implemented a new rule regarding leverage as well. This new rule is imposed on US-based Forex retail brokers and it limits them to offering a maximum leverage on major currency pairs of 100:1. These brokers are also limited to a max leverage of 25:1 on exotic currency pairs.

Finally, a new Compliance Rule prohibits brokers and Forex Dealer Members to open opposing positions simultaneously from the same account. Traders are required to close the positions that he opened first, also called first-in first-out.

If you have not yet been alerted to these changes they are important to keep in mind as they could greatly affect your Forex strategy. It is always important to stay up to date on changes to NFA regulations and rules to stay legal and maximize your Forex success.